Question 11 1.5 pts Which of the following statement(s) is/are correct? a. The I

Question

Question 11 1.5 pts Which of the following statement(s) is/are correct? a. The IRR method offers direct measure of how much a project adds to the value of the firm. O O b. The discounted payback period method discounts accounting earnings at the cost of capital for risky projects. O c. The IRR and NPV methods may provide conflicting investment recommendations when choosing among independent projects o d. The IRR and NPV methods may provide conflicting investment recommendations when choosing among mutually exclusive projects

Explanation / Answer

a is correct

The IRR method offers direct measure of how much a project adds to the value of the firm.

IRR or Internal Rate of Return is the rate at which NPV = 0 i.e. the rate at which Cash Outflows of the company is equal to the Cash Inflows of the company.

Hence, it a measure of how much the project is generating.

IRR and NPV always give same results about a project

Discounted Payback period is the period in which initial investment is recovered, where cash flows are discounted

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